Insurance

Take Charge of Your Finances 1.10.1.G1

Insurance

•Method of spreading individual risk among a large group of people to make losses affordable to all

Risk •Risk is the uncertainty about a

situation’s outcome•Three Major insurable risks

▫Person▫Property▫Liability- legal responsibility to pay

the cost of another person’s losses or injuries

How does it work?• Policy- a written contract describing the terms

of an agreement between you and your insurance agent

• Will include explanations of:▫Coverage-protections provided by the terms of a

policy▫Premiums- fee a policy holder agrees to pay to be

covered by an insurance company▫Deductibles- specific amount of loss a policy

holder pays before insurance will pay

Purpose of insurance

•Provide relief from fear of severe financial loss due to hazards and events beyond your control

•Hazard- a condition that creates or increases the likelihood of loss

•Indemnification- Meant to get you back to same financial condition you were in before loss occurred▫New home▫Healthy

Types of Insurance

•Types of insurance can include: ▫Automobile ▫Homeowners/Renters ▫Health ▫Life▫Disability

Automobile Insurance

•Automobile Insurance is an arrangement between an individual (consumer) and insurer (insurance company) to protect the individual against risk from automobile accidents

Four types of coverage for Automobile Insurance:

•Liability Insurance covers the insured if injuries or damages are caused to other people or their property. ▫It is the minimum amount of

insurance required by law for automobiles

▫If accident is your fault, insurance will not pay for your losses

Medical Payment insurance•Medical Payment Insurance

covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault ▫It also covers family members injured

as passengers or if injured as a pedestrian

Uninsured motorists insurance•Uninsured or Underinsured

Motorists Insurance covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insurance

Physical damage insurance •Physical Damage Insurance covers

damages caused to the vehicle ▫Collision – covers damage to your

vehicle from accidents you caused or not covered by other driver

▫Comprehensive – covers all physical damage losses except collision and other specified losses Fire, theft, hail, vandalism

Factors that affect cost of Auto insurance• Probability-mathematics of chance used by

insurance companies to set premiums• Includes:

▫Model, style and age▫Driver classification

Age, gender, marital status, driving record Stats- young, single more likely than over 25 married

to be in an accident▫Location of driver

Big Cities cost more▫Purpose- work, get around town▫Claims- request for reimbursement for a loss

under the terms of an insurance policy